Bulletin
2004/8 – December 2004
The Financial Reporting Council (FRC) met in Sydney on 6 December 2004. A list of the current FRC membership is attached.
The meeting considered the following main issues:
International Financial Reporting Standards (IFRS) Implementation Issues
The Council noted a paper prepared by the Commonwealth Treasury outlining the main implementation issues with regard to the adoption of IFRS including:
- the treatment of identifiable intangible assets,
- the preparedness of ‘small’ companies for the adoption of IFRS, and
- the effect that specific IFRS standards will have on the funds management industry.
Report from the Chair of the AASB
The Council noted an update on AASB issues provided by the AASB Chair including progress towards the 2005 timetable for adoption of standards issued by the International Accounting Standards Board (IASB); liaison with the IASB; the GAAP/GFS convergence and other public sector projects.
The Council noted that the IASB is increasingly attracting a cohort of high quality international applicants for membership of its working groups and therefore it was important to encourage highly qualified Australian and New Zealanders to join the working parties of the IASB in order to maintain our region’s influence over the international accounting standard setting framework. The meeting also agreed that the AASB, as the source of Australian members of the IASB’s Project Teams of standard setters, should co-ordinate Australian efforts to have nominees appointed to the Working Groups established by the IASB for each of its major projects.
The AASB Chairman also noted that that the IASB is considering substituting its regular national standard setter meetings for more technical and selective project based meetings. The Council concurred with the AASB Chairman that it was desirable for consultations to continue to retain the national standard setter meetings and agreed that in consultation with New Zealand a joint view on this issue should be put forward to the IASB.
Report from the Chair of the AUASB
It was noted that at its meeting on 30 November 2004 the Auditing and Assurance Standards Board (AUASB) held wide-ranging discussions on a number of important matters including further consideration of the AUASB’s proposed drafting principles for auditing standards, and an initial consideration of public comment letters received by the FRC and made available to the AUASB, with regard to the AUASB strategic directions paper.
The AUASB Chair also gave a presentation which considered the current Australian auditing standards drafting approach, the PCAOB drafting approach and the drafting approach considered under the IAASB clarity project. This presentation revealed the dilemma whether the AUASB should make minimalist changes to the existing standards, with further amendments expected as the IAASB clarity project unfolds over the next five to eight years, or whether the AUASB should make more significant changes to its standards ahead of the IAASB clarity project as it needs to issue revised audit standards which will have the force of law by June 2006.
It was noted that the AUASB strategic directions paper emphasises the objective of serving the public interest and having the highest quality auditing standards taking precedence over the objective of having minimal departure from international auditing standards.
The Council agreed that at the April meeting of the FRC in 2005, the FRC would be provided with a further paper to assist in the development of the proposed strategic direction for the AUASB which will have analysed the feedback received from the strategic direction discussion paper on the FRC website as well as teasing out the implications of the IAASB clarity project.
Report from the Chair of the Nominations Committee
On the recommendation of the Nominations Committee, the FRC agreed to all the recommended appointments to the AASB and AUASB, with notification of successful and unsuccessful applicants expected to be completed within the next week. When this process is completed the names of successful applicants will be posted on the FRC website.
With regard to future performance reviews of AASB and AUASB members, the Council agreed that a copy of the individual performance summary sheets will be provided to all members of the Nominations Committee, in addition to the Chairmen of both Boards and the Chairman of the FRC.
Report from the Chair of the Finance Committee
On the recommendation of the Finance Committee, the Council approved the updated AASB budget for 2004-05; the revised AUASB budget for 2004-05; the revised FRC budget for 2004-05 and the reallocation of $200,000 from the IASC funding contribution to overseas travel to enable the FRC to meet the costs of overseas travel by FRC representatives attending official international meetings and other Australians attending IASB or IAASB related activities where their travel costs are not met by stakeholder groups.
The FRC also noted the updated summary of costs for fitting out AASB and AUASB accommodation at Level 4, 530 Collins Street, Melbourne.
Report from the Chair of the Audit Independence Subcommittee
On the recommendation of the Audit Independence Subcommittee, the FRC agreed to the engagement of a consultant on auditor independence. The council clarified that the timing and duration of the workload of the consultant would need to be clearly established by the committee prior to the commencement of the consultancy.
Other matters
The FRC agreed to the documents necessary to progress the engagement of an FRC consultant on sector neutral accounting standards including the ‘Terms of Reference’ and the ‘Selection Criteria’ and that the FRC Chairman will have the authority to conduct the corresponding tender process for the selection of an FRC consultant on sector neutral accounting standards with the assistance of interested FRC members, so that a recommendation on a selected consultant could be considered by the FRC either via circular resolution or at its first meeting in 2005. It was noted that an advertisement for the consultancy position should be released in early 2005.
The FRC agreed to the appointment of Ms Joanna Perry, Chairman of the New Zealand Financial Reporting Standards Board, to the AASB until 31 December 2005. This appointment is consistent with the objective of developing closer Trans-Tasman ties on accounting issues between Australia and New Zealand.
The FRC agreed to meeting dates for 2005, these dates have been posted on the FRC website. The FRC has also agreed to hold an additional meeting during the second half of February 2005, with a date yet to be established.
The FRC is the peak body responsible for the broad oversight of the accounting and auditing standard setting process for the private and public sectors, as well as monitoring the effectiveness of auditor independence requirements in Australia. It comprises key stakeholders from the business and investing communities, the professional accounting bodies, governments and regulatory agencies. The FRC advises the Government on the accounting and auditing standard setting process and on the development of international accounting and auditing standards. It determines the broad strategic direction of the standard setters, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board.
For further information, please contact the Secretariat of the Financial Reporting Council
c/- The Treasury, Langton Crescent, Parkes ACT 2600.
Mr Jorge del Busto
Ph: (02) 6263 3144
Fax: (02) 6263 2770
E-mail:
jdelbusto@frc.gov.au
or visit the FRC’s website at
www.frc.gov.au.
ATTACHMENT
Members of the Financial Reporting Council
Members:
- Mr Charles Macek, Company Director — FRC Chairman (appointed as Chairman by the Treasurer and nominated as an FRC member by the Securities Institute of Australia);
- Ms Elizabeth Alexander, AM, Adviser to Blake Dawson Waldron — FRC Deputy Chairman (appointed as Deputy Chairman by the FRC and nominated as an FRC member by the Australian Institute of Company Directors);
- Mr Don Challen, Secretary, Tasmanian Department of Treasury and Finance — nominated by Heads of State and Territory Treasuries;
- Ms Karen Hamilton, Chief Integrity Officer, Australian Stock Exchange — nominated by the Stock Exchange;
- Mr David Jackson, Director, Australian Shareholders’ Association — nominated by the ASA;
- Mr Graeme McGregor, AO, Company Director — nominated by CPA Australia;
- Mr Jim Murphy, Executive Director, Markets Group, Department of the Treasury — nominated by the Commonwealth;
- Mr Tom Pockett, Chief Financial Officer, Woolworths Limited — nominated by the Business Council of Australia;
- Mr Greg Pound, Chief Accountant, Australian Securities and Investments Commission — nominated by ASIC;
- Mr Phillip Prior, First Assistant Secretary, Budget Group, Department of Finance and Administration — nominated by the Commonwealth;
- Mr Brian Scullin, Special Adviser to Head of Deutsche Asset Management, Asia-Pacific – nominated by Investment & Financial Services Association (IFSA);
- Ms Catherine Walter, AM, Company Director and Solicitor; Chair of the Business Regulation Advisory Group;
- Mr Klaus Zimmermann, Chief Executive Officer, Eldercare Incorporated and National President, National Institute of Accountants — nominated by the NIA.
Alternate members:
- Mr Roger Cotton, Chief Executive Officer, National Institute of Accountants; alternate member to Mr Klaus Zimmerman — nominated by the NIA;
- Mr Stephen Harrison, AO, Chief Executive Officer, The Institute of Chartered Accountants in Australia; alternate member to Mr Lewis Ting (no longer a member) — nominated by ICAA;
- Mr Greg Larsen, Chief Executive Officer, CPA Australia; alternate member to Mr Graeme McGregor, AO — nominated by CPA Australia;
- Mr Michael Rawstron, General Manager, Corporations and Financial Services Division, Department of the Treasury; alternate member to Mr Jim Murphy — nominated by the Commonwealth.